Dynamic Litigation Analysis: Predicting Securities Class Action Settlements as a Case Evolves

07 January 2013

For a number of years, NERA has been providing statistical predictions of settlements in securities class actions. Some of the important determinants of expected settlements that our statistical analysis has uncovered in the past have been described in earlier publications. This paper introduces a powerful new tool for understanding expected settlement values for securities class actions: dynamic litigation analysis. This model allows for statistical forecasting of settlement amounts that change as the litigation process moves forward, providing internally consistent predictions. It allows for what-if analysis, answering questions such as, "How much more would this case be expected to settle for if the motion to dismiss were to be denied by the court?" To the best of our knowledge, this is the first model ever built with these capabilities. This paper describes the model, discusses some of the important drivers of expected settlement values, and provides some illustrations of how the model works.